tv Market Makers Bloomberg April 2, 2015 10:00am-12:01pm EDT
>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. erik: mcdonald's figured they deserve a break today, so it is pumping up raises for 90,000 employees. look for real costs for mickey d's. stephanie: we will tell you about the high-profile ceo's on controversial issues. erik: and businesses at the top of our bloomberg bracket. good morning, everybody. welcome to "market makers" here on bloomberg television.
i am erik schatzker. stephanie: i am stephanie ruhle. erik: breaking news -- but last big piece of economic data before the jobs report, julie hyman is in the newsroom with the headlines for us. julie: the expectations were not very high going into the report, but the number is coming in that are than the estimates with a rise of .2%. this is the fastest rise we've seen since last july, and we have seen this downtrend as of late, a drop of .3% was what was estimated, however, there is a dark spot, and that is the revision. the month earlier revision for january, the number revised lower to .7% drop from .2%, so that may be a watch if you look at all things considered. the fact is we broke this losing streak and it might be viewed as a positive sign by economists and the market as well. erik: julie, thank you very much. let's not forget the jobs report and special coverage here on bloomberg television. stephanie: and the top business
stories of the morning. first-time claims for jobless defense have fallen to their lowest level in nine weeks. that is considered a sign of strength in the labor market. it indicates employers are optimistic about their prospects and the missing -- and dismissing fewer workers. tomorrow, the march jobs are worth. economists expecting to show that payrolls increased by 235,000 last month. so much for the deadline in negotiations over iran's nuclear program. it is more than 36 hours since diplomats ignored the deadline in switzerland, and they are still talking. there is concern that the talks will end with a statement rather than a blueprint for going forward. earlier this week, there was a sense that iranians were using the deadline to pressure american negotiators. president obama told the u.s. team to simply ignore the deadline to make it clear to the
iranians that the u.s. could walk away without lifting economic sanctions. and over in greece, the prime minister's chief rival is offering a political rescue. we have heard there is indication he is willing to join alexis tsipras in a unity government if the current anti-austerity coalition falls apart. tsipras is being pressured to make concessions to european lenders to get more bailout money, but he is calling the opposition's proposal and "midsummer night's dream." and senator menendez says they do not know the difference between friendship and corruption. he had gifts in exchange for dancing the interests of a long time friend. he says he will not step down from his office. senator menendez: the people of this great state elected me to
serve their interests in the united states senate, and that is exactly what i have and will continue to do no matter how long it takes to clear my good name. stephanie: menendez will step aside temporarily as the senior democrat on the senate foreign relations committee. he is the son of cuban immigrants and is highly critical of president obama's efforts to restore relations with cuba. in eastern kenya, terrorist gunmen targeting christians attacked a university campus today. at least 15 people were killed, and more than 50 were taken to hospitals. the islamic group claimed responsibility. one of the suspected gunman was arrested while trying to flee the scene. in 2011, kenya sent troops into small you to fight the terrorist groups after a wave of violence. erik: liquidity is the buzzword on every investor's lips. how many of you really know what it means? wall street was taught a harsh
liquidity lesson back in 2008, and it will not be long before we confront the next liquidity challenge. time, i say, for a master class, and who better to explain but what he than howard marks? he is chairman of oaktree capital and perhaps the world's most accomplished investor in distressed debt. welcome back. howard: thank you, erik. erik: what is it that most investors do not understand about liquidity? howard: everything. [laughter] stephanie: there you go. howard: most people think something is liquid if you are allowed to sell it. marketable securities -- stephanie: it does not mean you can sell it. howard: exactly, stephanie, and it is not mean you can sell it without affecting the price, can you sell what you have at a price close to the last? of course to somebody who wants to own and does want to buy it can you buy it at a price close to the last come and answers to those questions may be very different. erik: steve schwarzman told us last year i think it was, of course of the group, said look
what he. is liquidity overrated? erik: you can get yourself in a situation where -- they got a margin call could not sell assets and went under. aig in essence got a huge margin call that they could not meet so you could make it very important, or you can make it un important. the best thing you can do is set up your fares so you're not dependent on the presence of liquidity. one of the things i say in my recent memo is that liquidity is plentiful when you do not need it and disappears when you need it most. stephanie: how do you price that in? when you look at the overall credit market when things are going well, no one is thinking about liquidity. howard: right. as i say, you never know if it is going to be there when you decide to sell, so you should -- erik: pretend that it won't be. howard: well, it is good to
assume that it will not be, but that may make you over conservative. i think it is better to not be reliant on its presence. i things you will not have to sell. erik: what about all of the instruments being offered today that promise liquidity? stephanie: like what, etf's? erik: like etf's, others. howard: it was in early 2009 that warren buffett said only when the tide goes out to you find out who has been swimming naked. it is only in a tough marketplace that we find out whether things live up to their promise. erik: ok, but we want your opinion. will we? what will we find out? when there is a liquidity challenge in the credit market and everybody is stampeding for the exit trying to cash out as fast as possible because prices are dropping like a rock, what is going to happen to these instruments that purport to
offer investors liquidity? howard: first of all, the one thing i am sure of is that nobody knows. these are new what i call "wall street wonders," and nobody will know how they will perform until they are tested, but you see people are going into etf's for illiquid assets. they are when everything is copacetic, but the liquidity can dry up easily. there are people going into the etf's under the assumption well, i can get out any minute. so they are assuming, then, that the etf is more liquid than the underlying asset. i think that is always a terrible assumption. no investment vehicle should promise more liquidity than is inherent in the underlying. stephanie: are these etf's being mis-marketed? it seems people are specifically
getting into high-yield etf's because they offer more liquidity. howard: well, you can sell them many times but let's go back to your first comment -- at what price? if the bonds are falling, will you be able to sell them at the price that was used to calculate the last nav? not necessarily is the key. these things were nonexistent 20 years ago. a fraction of what they are today 10 years ago. and the next time around, we will find out if they deliver this miracle of something for nothing. i talk in the memo about traditional assets. a traditional assets, i use that jocularly. a traditional asset is one where to get more return, we accept that we will have to take more
risk. of course that is the truth about all investments, but the wall street wonders are billed as something for nothing. we can give you the return of x without the risk, and that really sounds too good to be true. i once wrote a memo call "what were they thinking?" when we turn around, after things disappoint him everybody says well, what were those people thinking? that was certainly too good to be true. let's think about it in advance. i realize now that the title of the memo was "hindsight first place," every thing is obvious in hindsight. erik: people like larry fink, chairman and ceo of blackrock, knows a few things about investing in credit markets, has bemoaned the loss of liquidity in financial markets and particularly in credit as a result of dodd-frank and evil or rule -- and the volcker rule. howard: larry is right, as on
most things that she is a pretty good investor. historically, -- as on most things -- he is a pretty good investor. historically, if securities drop, the brokers would walk in and say i buy from my own account because why, because they thought they were getting bargains. they were not doing it to be mother teresa. they were doing it to score some bargains. but in the process, they brought liquidity back to the market. stephanie: what is more valuable to the buy side? the fact that they cannot take risk anymore and good times is great, they're no longer a competitor to you. a few years ago, goldman sachs was as much a competitor to oaktree as appaloosa was. howard: the answers that question stephanie, is yes. to both. we want them to be a buyer for the purposes of the overall market some overall liquidity the safety of the system. it helps to have the last
resort. for oaktree's own purposes, yes, there were times that they competed against us to buy things and drove up the price. those things go hand-in-hand. erik: we are living in a time right now where it seems the financial markets are liquid. howard: right. erik: people consulting's at the prices they won for the most part. is it illusory? and if it is, how much of that is a function of liquidity that was pumped into the market by the fed and is now being pumped in by the ecb and the bank of japan, etc.? howard: it is not illusory in that it is real today, but it is an ephemeral -- it may not be real tomorrow. did he comes and goes full stop if you want to sell whatever else wants to buy, it is liquid. liquidity comes and goes readily and one day something can be bought one day to be sold on the one that you can sell a little, one date you can sell a lot, but you are right in thinking that the injecting of
money into the system and the lowering of rates to near 0 has pushed up the valuable assets, created artificial demand for assets, the person who used to own treasury notes and get 6% today is offered 1%, and he says oh, you know, i would like to buy some high-yield bonds, so he goes out and buys them and he makes that market very liquid. but that liquidity could prove to be temporary, and nobody should count on it being permanent. stephanie: what should he or she do then? he is under pressure he needs to perform for his investors, so what can he do? howard: he should buy things that he can hold in tough times and if you buy a credit worthy high yield bond fund for example, and you say i hope a given return from this, and things go against you, at the minimum you will get the interest and the repayment that
you were promised, and you will have the experience. you will get the yield you bought it for. if, number one, your situation permits you to hold for the long-term, and number two, you have made good credit decisions and the company, in fact, does pay. all of that has nothing to do with liquidity. and i think that is the prudent way to invest. stephanie: and that concludes today's master class with howard marks. howard, thank you so much. howard: thank you. erik: howard, i have to take a moment to share with everybody breaking news come as do with the plane crash in the alp of thats germanwings plane. french authorities have found the second blackbox crippled to reconstructing the events that took place immediately before the tragic crash of the jetliner killing all 150 people on board. and also german prosecutors say the copilot, andreas lubitz, the
man under investigation researched suicide methods and cockpit door security in the days before he allegedly drove that plane into the mountainside. prosecutors have found a tablet computer at his apartment, and they were able to reconstruct searches that he did on that tablet computer from march 16 to march 23. that is just out now as more details become available, we will of course share them with you. a crash that has riveted the world, a tragedy of proportions difficult to describe. stephanie: we will be back with more after the break. you are watching "market makers" on bloomberg television for seven again, howard mars chairman of oak tree thank you for joining us. ♪
warning signs. the index dropped to a three-week low. another sign of strength in the labor market. first-time jobless benefits fell to a nine-week low. it was 20,000 less than the previous week, indicating that employers are holding onto workers. we will have special good friday coverage of the jobless report tomorrow. airbnb wants to cash in on cuba. and travelers to cuba can book rooms through the online rental service. cuba may become one of its biggest markets in latin america. in january, the obama administration made it easier to do business in cuba. airbnb is among the first companies to establish there. those are your top stories for stop coming up in 10 minutes tim cook and ceo's are making their voices heard in a bid force executives to speak out on social issues. plus, the top dogs of the bloomberg bracket. we will see how cisco's john
chambers is doing. he is not the only one. stephanie: i certainly did not pick one. wages are rising underneath the golden arches. mcdonald's is increasing salaries to nearly $10 an hour, and will start offering vacation time but it only applies to locations that are company-owned, and about 90% of mcdonald's restaurants are franchises. woh-woh. so most will not be effective. bloomberg intelligence analyst jennifer -- i cannot say her last name. she covers restaurants. jennifer, is this going to have any real impact? the fact that 90% of the restaurants are franchises, i kind of feel like are you kidding me, mcdonald's? you will take out a full-page ad, pat yourself on the back for what? jennifer: it is a very small number of restaurants in the scheme of things that will be impacted. donald is trying to gain good
grace with public view. the perception as they are raising wages, the impact is quite small. if you look at operating incomes for the united states, you are talking about a 4.4% impact to net income if they were to put percentage rates into place. erik: which they are. can you model that forward and draw the conclusion that that is the kind of impact it will have on operating income? jennifer: based on 2013 data, which is all we have from mcdonald's usa operation, it comes out to be a four for four -- a 4.4% increase which generates to about $.25 per share. erik: let's talk about the relationship between the parent company and its franchisees. in donna's cannot order its franchisees to raise wages. jennifer: nor does it want to. there is a series of litigation in place that people are saying they are not paid fair wages are trying to establish a class-action in including mcdonald's to force them to pay. erik: is there a possibility
that because they are all operating under the same banner that the franchisees will feel compelled to follow mcdonald's lead? jennifer: they may feel compelled, but at the end of the day, each of those franchisees looking at the economics of their individual restaurant and waging -- raising wages is a cost, and food costs as we all know is not going down. to the franchisees, it is a hard thing to swallow to be able to pass on additional pay raise. stephanie: are you rolling your eyes out this "new york times" ad? because i am. jennifer: they are definitely trying to reinvent their image with the american public. erik: there is nothing wrong with that. stephanie: sure, you want to have a better image, but it needs to be real. erik: it is as real as they can make it. they are only doing what they can. walmart is doing the same thing. stephanie: hold on, if you put out an "new york times" ad saying "we are raising wages,"
that as a whole lot of bull if it is only 14%. -- for 10%. erik: i disagree with you. stephanie: really? erik: you think it is being disingenuous? i disagree. stephanie: let's have a tiebreaker. what do you think? jennifer: a few weeks ago, they said they would remove hormones from their chicken products, so there is a series of actions mcdonald's is trying to do. erik: jennifer, thank you. jennifer bartashus of bloomberg intelligence. "market makers" will be back in a couple of minutes. in the meantime -- stephanie and i will -- stephanie: argue during the commercial break. erik: you know what. ♪
>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. erik: welcome back to "market makers." here on bloomberg television, i've erik schatzker. stephanie: and i am stephanie ruhle, and just so you know, we did argue all commercial break. erik: these are the top stories of the moment -- breaking news investigation into the germanwings plane crash. authorities have found the plane's's second black box, the data recorder. german prosecutors say the copilot blamed for the crash searched the internet for suicide methods. he also looked for details of the cockpit door security mechanism.
fed chair janet yellen says the conference needs more mobility. in a conference, she said we need to find which policies work best for an economy where people can get ahead. chair yellen: the gap between rich and poor no recs in a major concern in the minds of citizens around the world -- now ranks in theas a major concern in the minds of citizens around the world. people worry that children will grow up to be worse off financially than their parents were. in the united states, roughly 80% of americans across the ideological spectrums see inequality as a moderately big or a very big problem. erik: yellen has used her first year as fed chair to advocate for those hurt most by the great recession. no deal between the united states and iran, and negotiators are growing more pessimistic.
the foreign minister says there has been progress but no resolutions. >> we reviewed all solutions. these solutions were discussed as general topics, which are to be agreed upon between today and july 1 and lead to a final agreement. right now, these members are talking. let's see what they can do. erik: negotiators have worked beyond that self-imposed deadline. according to the "new york times," there were signs the iranians were using deadlines to pressure the americans. president obama told the united states, his team, rather, to ignore the clock and made it clear the iranians and u.s. could walk away without taking away economic sanctions. and in california, governor jerry brown is ordering mandatory water restrictions for the first time ever. local water boards will be told to cut water usage by 25%. he says time has passed for
halfway steps. governor brown: the reality is climate is getting warmer, the weather is getting more extreme and unpredictable, and we have to become more resilient, more efficient, and more innovative, and that is exactly what we are going to do. erik: before and after pictures tell the story. the big problem is the sierra-nevada snowpack. it is the lowest in a 65 years of record-keeping. makers of scotch looking for ways to drown their sorrows. global exports of scotch fell 7%. one problem -- american drinkers are dropping scotch and turning to bourbon and other american-made whiskey. stephanie: apple's tim cook walmart's doug macmillan, and salesforce's ceo marc benioff have spoken off against laws in india and arkansas that they call anti-gay. yesterday, three dozen tech leaders issued their own statement to lawmakers calling for an end to these bills, which supporters say defend religious
freedom. it is not the first time top executives have used their clout to weigh in on social issues but it is not particularly common. bloomberg's david gora has been looking into this. it is david's debut here on "market makers." tell us about the situation. david: it is not unusual for countries to care about public policy. what is unusual here is that these objectives are coming out publicly. erik: personally. david: exactly, curse -- personally. if you go back a few seconds ago urban shapira spoke in favor of superfund legislation which was unorthodox, chemical companies in favor of legislation, but this is rare. stephanie: can it backfire? david: absolutely. the founder of dominoes for instance, very against abortion rights will stop every ceo,
every executive has this calculus exam by his employees and customer base -- is it going to upset more people than it is going to please youe? erik: they know, however, that this country -- has there ever been a moment where the country cared more collectively about jobs coming out of a great recession went so many jobs were lost and what the ceo's are in place only if not explicitly threatening is that they will do less business and maybe even take their jobs away. david: yeah, mark benioff said from the beginning that he will pull salesforce out of indiana. so, yeah, i think that is a real threat and to see the way that marc benioff threaded the needle -- it is more about business. stephanie: why is it tech leaders, not other companies? david: different leadership, a
lot of them are unbridled founders of these company, that opens them up to be more frank. they are more intuitive than their leadership style and we can't expect them to act more from the got, maybe. erik: that said, we did hear from walmart on arkansas, and few conservative -- few companies have more conservative families than the waltons. david: and coca-cola. the rock is rolling down the hill, beginning to pick up steam. it definitely started in silicon valley, as you said. erik: good stuff. stephanie: indeed. david gura to every muslim our new addition to bloomberg tv. erik: he may be the last man standing one of only three people who have a shot at winning bloomberg's basketball bracket. stephanie: yours truly knocked
erik: now to recap the breaking news on the investigation into the germanwings airplane crash in the french alps. investigators and germany have found some damning evidence to support their theory that andreas lubitz deliberately crashed that plane. a tablet computer that they found in his duesseldorf apartment show that he looked up information the days prior to the crash about cockpit door
mechanisms and ways to keep the cockpit door locked. it is pretty difficult to absorb that information and come up with any other conclusion than that he drove the plane into the mountain on purpose, as prosecutors believe. investigators in france, meantime, have found the second so-called black box full stop this will be the flight data recorder. also critical to piecing the events that also led the plane into the mountainside, killing all 150 people aboard. those are the latest developers this morning, some major ones in the investigation to the germanwin airplane crash. gs stephanie: now onto a very different story. the bloomberg bracket. we have organized a march madness contest between 36 titans of business with 35 losers who will each contribute $10,000 to the charity of the winner's choice, and as we head into the final weekend, there are only three men left standing with a chance to win it all.
goldman sachs president gary cohn quicken loans founder dan gilbert, and cisco's ceo john chambers. john has one chance to win if duke university beats kentucky in the finals, but if the blue devils pull it out, it will be a great day for second harvest food bank of santa clara and san mateo counties. john is with us now. john, tell us how you take your final four, and not just your final four because i want to point out since the beginning of these brackets, you have basically been in the number two or number one spot, so you have been sitting pretty the whole time. john: well, stephanie, thank you very much. the sports teams that i've had the fortune to be associated with, stanford plays in the finals tonight, the warriors are the best team in the nba, the west virginia team made any final 16, the duke team, i went to duke for two years, almost married my wife five years
earlier than we had about getting married at west virginia, and then i went to indiana, and that is where i got to know coach k, so i am a huge duke fan. i have got our lucky duke basketball here with coach k's signature that we passed around to employees inside our company that are facing tough times, so i'm a huge believer in duke and love my basketball, but candidly, i have just been lucky on this one. it is an honor to hopefully bring on $360,000 to second harvest food bank. stephanie: for you, these world personal decisions will stop you were not throwing a dart at the board will suck you were a west virginia alumni, you spent time at the -- at the board. you were a west virginia alumni, you spent time at duke. the others are cleveland guys and they love big ten ball. john: [laughs] well, kentucky, most of us gang up on kentucky, they are so good. i am a west virginia fan, and west virginia and kentucky many years ago had the best rivalry in college best law. now it is duke and unc.
i would love for the acc to beat up a little but on the big ten periodically, even though coach k and i are good friends that have been for many years. stephanie: why second harvest? if you decide you do not want to do second harvest of the last second, my charity, girls ink would, gradually take the $350,000 come even though i do not pick the winning teams. john: i am passionate about two things -- first one i love basketball. i wish i could have been a bath while player rather than ceo. secondly, i enjoy -- and our whole company, is very focused on giving back. second harvest food bank we have been associated with or 23 years will stop we go food there every year. we have given almost $40 million to the food bank over the last 12 years. our employees put in 42,000 hours and food hunger opportunities around the world. in silicon valley, here you are
in the heart of the most exciting economic location in the world and one out of 10 people receive assistance from second harvest. 40% of those our children, so this is a great organization. kathy jackson, who runs it, does a great job. they returned $.95 on the dollar that you give them to the recipient of their work, so it is a great organization, one that we are pleased to be associated with. getting back i think is an important part of those who have been -- giving back i think is an important part of those who have been fortunate in life. stephanie: waking up and having an extra $360,000. john: yes, they probably are, they know they are my favorite organization and candidly our company's favorite organization, so we have had the good fortune to win the corporate social responsibly award from president obama and secondary clinton and from president bush and secretary rice when they were there for our work in the middle
east. i think it is important that we invest equal energy here locally, so kathy is very much aware of it, and i think our duke team will bring it home on monday, so we will stay tuned. we are very excited. stephanie: all right, john, a lot of people believe it is a longshot for duke. many people are going with kentucky, but duke is a wall street favorite here in new york and i told gary earlier i hope he wins you know what maybe i will change my tune for stop i hope you do. maybe the three top winners should split it. john, thank you so much, good luck. cisco's ceo john chambers will stop who knew this guy knows a lot about basketball? erik: it is time to bring you on up to speed on the top story. a billion-dollar loss, 45% drop in the stock price, all in all not a good year for genworth ceo john mcinerney. he receives no bonus or stock options. genworth was hurt by
higher-than-expected cost from a long-term insurance. godaddy is up about 2% right now. the company provides internet domain registration and web hosting services or small businesses. the company was up 31% in yesterday's trading date debut. revenue rose 23% last year. the copy is still not making a profit. iraq is one of the reasons that shipping rates for oil tankers are at a six-year high. the country is at 40 more oil than any time in three decades. about 5% of the global fleet are lined up at the iraqi port. those are your top stories. coming up in five minutes, he is a master of the final four, you will hear about march madness from goldman sachs president gary cohn. plus, if you are confused lower the u.s. stands when it comes to iran, joined the rest of us. william cohen will join us.
only three men are still in the race. we just heard from cisco's john chambers. there is also quicken loans founder dan gilbert, and the third goldman sachs president gary cohn.check this out. gary's takes were absolutely perfect. confident to win it all if the badgers are the chance, that means $360,000 for his chosen charity, harlem rbi. he will also win if michigan state keeps the upsets coming and wins the championship and cohn also comes out on top if duke loses to wisconsin. -- if duke beats wisconsin. i spoke with rich berlin. he told us about harlem rbi. rich: gary got involved as we were launching a capital campaign for our charter school business, so we started by taking an abandoned lot and turning it into a ball field.
that has grown into charter school, family programs, and it is culminating now in its $53 million building, which gary helped anchor, along with mark teixeira of the yankees and other guests you have had on here. the end product is enormous, great stuff for kids, and this guy has been a pretty solid supporter. stephanie: 300 $60,000 you stand to get here. what are you going to get -- to do with the? rich: it is already spent, trust me. we spend ahead of raising, writes? this will allow us to expand programs, pre-k programs, the opening of our eighth grade next year, and most importantly a new harlem rbi in south bronx the poorest congressional district in the united states where 400 kids are now in a program and we will build a ball field just like we did on east 1 hundred st -- east 100th street.
stephanie: how did you pick because i had a good chance? gary: dan gilbert and i both picked michigan state. what do we have in common? stephanie: you are both from ohio. gary: cleveland. we both from the midwest, we both watched big ten basketball all year long. everyone in the ease in northeast watches the big east and they watch the acc. they do not understand or maybe they do understand but we just got lucky, they do not understand the quality of basketball that the big ten plays all year long. what i think happened, and if you look at -- i think six of the last seven years -- we had a big ten team in the final four. what happens is all of the east coast guys watch the acc, they watch the big east, they look at the big ten teams they do not have the best records in the country because they beat each other up all year long, but when the big ten teams come in and
play the others, they tend to shine. it happened in the football playoffs, ohio state wont the national football championship a big 10 team, and it is happening in basketball. it was not dumb luck at all. i look at the midwestern guys, dan governor myself, picking washington state been a final -- picking michigan state to be in the final four. stephanie: if it was not for this 306 $2000 on the line, would you be -- this $360,000 on the line, would you be -- rich: i would be watching anyway. our head leader is from kentucky, but i think she knows where her bread is buttered this week. stephanie: gary, are your wife and girls going to watch? gary: one of my girls will watch. my other two girls will have no idea there is basketball going on, and my wife will make sure she is nowhere near it. stephanie: there you go, gary is in it, he has a good chance of
winning, but i want to recap how each of the three can win, erik. erik: they have all got a shot. stephanie: there you go. gary cohn will win if wisconsin wins the whole thing, and in fact he will win as long as wisconsin beats kentucky in the semifinals on saturday. it will not matter whether it is michigan state or duke. let's be honest -- almost everyone thinks it is going to be kentucky to win. it does not mean though, that gary is the favorite for stuff you have to give that distention to dan gilbert because things will go -- because he will go if things go as expected and kentucky finishes off a perfect season. he will also come out on top is kentucky advances to the finals and then loses to michigan state, which i do not think will happen. do not count out john chambers will stop he is going to win if duke beats kentucky in the finals will stop let me tell you off air, gary has another whole plan for stuff he thinks maybe there should be a hedging strategy now, today, everybody
>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. stephanie: what airbnb hopes to do by taking advantage in relation between -- washington and have on a. -- of anna. erik: william cowan will help us sort it all out. stephanie: they are not making the nba playoffs this year, not even close. but they are trying to capitalize on america's love affair. welcome. i and stephanie ruhle. erik: let's start this hour with
the bolton, the top business stories of the morning. breaking news on the investigation into the crash of the germanwings airbus. the crash site, the french alps have found the plane passes other black box. this one records data. germany, very disturbing prosecutors say the -- the copilot research suicide on the internet. they saw the tablet of him -- of his in the apartment. they also looked into cop it desk on that security devices. iran passes nuclear program, it has been more than 36 hours since diplomats in switzerland set the deadline and passed it. there is still parking. concerned talks will end with some sort of statement rather than a blue point -- blueprint going forward. using the deadline to pressure american negotiators. the new york times says president obama is holding his team to make it clear to the
iranians that the united states was willing to walk away. later today, the president will criticize a republican proposal to repeal the estate tax. he will be in louisville kentucky speaking about the economy. the president will discuss concerns about getting rid of a $300 billion tax that affects relatively few people. republicans say killing the us state tax would help farmers and small business owners keep their businesses in the family. mortgage rates barely move this week as this season is about to get underway. the average for a 30 year fixed rate loan stay close to a historically low 3.7% a year ago. you would have paid 4.4%. the average for a 16 loan -- airbnb has expanded to cuba. american travelers to cuba can book rooms through the online service. cuba could become one of its biggest markets in latin america. in january, the obama
administration loosened restrictions on doing business in cuba. in eastern kenya, the death toll is rising in that terrorist attack on university campus. they killed at least 22 people and took hostages. the islamic group claims possibility. in 2011, they sent troops into somalia after a wave of violence. stephanie: we were just talking to a goldman sachs president gary cohn. that is not the only thing keeping the big g up last night. i spoke exclusively with gary about what is going on with the markets. starting with his take on oil. gary: we have been kicking around 45 to $50 pair what i said recently is i think the front end of oil can go down. we are getting to that point. if you look at the storage capacity in the mid continent of the united states, we are
basically close to capacity. if much more oil comes into the system in the united states, we will fill up capacity and storage. we will have to price in more to attract in more storage and what we will see happen is the front end of the oil comes down, the back end will stay unchanged. it still means we will wake up to a day where we see a headline where the price of oil is substantially lower than it is a i believe that will happen pretty little bit of it is the supply. as you get into the turnaround cycle, they change the refining mix in the spring and fall. right now, changing from a heavy heating oil mixed to a heavy gasoline mix. when they changed the cycle they stopped consuming crude oil for a few weeks. we are seeing crude oil back into the system right now. i still believe that will happen. the correction is traded between a 45 and $50 range.
stephanie: oil is the holy grail right now, amazing opportunities, do you agree? gary: we have got a lot of supply of oil in the system and we are continuing to build supply. the new trend going on is quite interesting. because there is no demand for new wells, oil rigs, drilling rigs, have become very cheap. people are starting to drill a lot of wells. they are not fracking. that means you could drill the well and cap it and sell against it. if the price of oil goes up, you frack the well and deliver it. if it goes down, you buy back your hedges. if there is going to be a natural cap and oil market in the relatively near future, i do not believe the price of oil by health is the next great trade. i think there will be distressed assets coming out if the price
of oil stays this cheap for this long. i think that will happen. it will take some time to work through that cycle. stephanie: do you agree it is a bubble? gary: i never like disagreeing with mark but i will. when you look at the nasdaq at 5000 and now, versus where it was the last time we were at 5000, it is substantially different. the composition of the index is different. companies that make up the index are different. multiples are substantially different. earnings power is different. the fact you and i are using companies in the nasdaq as part of our standard daily living, and i am not sure we could live without those companies today they have become part of our everyday life here they are making our life different. they are making our life better and we depend upon the companies. when you think about an
environment where we are using the products and goods and services those nasdaq companies produce every day, those companies seem relatively fairly valued to me. stephanie: we thought janet yellen would be patient and dovish and that is not the case. gary: i still think she will be patient and dovish. she has got to be patient. i understand janet yellen wants to and i understand the need that she really wants to raise interest rates. if you were janet yellen, you would want to raise interest rates and have the ability to lower the interest rate if something went wrong. nothing is scaly or than being head of the central bank and not having the ability to stimulate the economic cycle. it is a bad position to be in. i understand her position. she has got a dual mandate. she has an inflation mandate. no inflation in the system, no signs of inflation in the
system. q1 gdp will be lower than people think. q1 earnings will be lower than people think. she will continue to be in this position of intellectually wanting to raise interest rates but fundamentally not being able to. stephanie: i think there is nothing scarier than being a central banker in europe. at least janet yellen is standing atop a strong economy. gary: a stronger economy. they are in a devaluation of the euro transition. they have made it quite simple. we are in week three or four of qe. they have got many more weeks ahead of us. they will continue to ride debt in europe. the only parameter they put on themselves is they will not i below -20 basis points and will not own more than 25% of any outstanding issue. that is the only parameter. we are just at the beginning of this in europe, which i think will continue to lower rates in europe, which will continue to put pressure on the united
states, which will continue to be deflationary for the united states. stephanie: that was my exclusive interview with the goldman fact -- goldman sachs coo, gary cohn. erik: i am a was surprised to see him as forceful with his opinions as iesco goldman sachs is a big place. a team of economists job is to come up with their own expectations of what will happen to fed policy. stephanie: that is why i especially give it a lot of weight. he is not afraid to push you out there. and never seems like he is just telling the company. erik: i have to check to see if his view matches that when it comes to it jenny on will do about fed policy. he does crystallize the dilemma very well. stephanie: he brings up a great point. when you talk about the stocks that comprise the nasdaq, look at these companies, gary makes a very good point, many of these
companies moaning and groaning that the valuations are crazy, they are part of our daily life. it is not like these businesses are going away tomorrow. erik: it does not mean they are necessarily worth what they're worth. just because they are part of daily life it does not mean whatever the case may be facebook, were go daddy, are going to grow into the valuation that the market has the stowed upon them. stephanie: you're right. it is just amazing just this last week when our costa rica, i felt like go pros were everywhere i looked. this is a company, a product you did not know about four years ago. erik: facebook is richly valued at 42 times earning. stephanie: he is a man who has no place for facebook in his life. not a facebook man, but new to instagram. there you go. erik: when we come back, the
jul breaking newsie: -- julie: breaking news. medical care. the company is seeking buyers for a life annuity unit. this is according to people familiar with the matter. it is the life annuity insurance company. the firm is working with goldman sachs to look for buyers for that unit. they will continue -- consider
selling it if they cannot find the buyer and it all of this is according to people familiar with the situation. the stock, as you can see on the start -- on the chart behind me, is seeing a spike up on this news that it is indeed looking for a buyer for this unit. we had known previously the company was laying a breakup but this is a little more concrete. breaking on the bloomberg terminal. stephanie: thank you. americans are growing more come -- more confident in the economy. the consumer index has climbed to the second highest reading since july of 2007. greater purchasing power is boosting the way americans see finances and the buying climate. it is the latest big economic number we will get before tomorrow passes jobs report.
a surprising report on factory orders. the on especially rose in february, the first increase in seven months. the increase was not very big, 2/10 of 1%. economists had forecast factory orders would fall. in indiana, the legislature is repaired to amend a controversial law that critics would say would allow discrimination against gays. the backlash prompted legislative leaders to propose changes. they are aimed at preventing businesses from discriminating against anyone due to sexual orientation. those are your top stories. coming up in just 10 minutes, heading to havana, airbnb opens up shop in she -- in cuba. will the promise be more than the payoff? and this is a slamdunk, betting on the future of fantasy sports. the philadelphia 76ers are now involved. we will speak with the ceo scott o'neill. erik: in switzerland, western
diplomats are trying to reach a deal escape -- in exchange for a loosening of sanctions. it passed 36 hours ago. any deal right now would likely be preliminary with even more negotiations continuing until june. for a closer look, let's bring in the founder of the cowen group, -- cohen group william cohen. there will likely be something connected to the union toss. at some point, they cannot say when. does that suggest anything to you? william: it could be they are calling them off for the time being. there are two things involved in terms of the negotiating strategy with iran. the optics and the substance. in terms of the substance it seems to me we have taken a full year of negotiating all kinds of details. then we come back to the central issues involved. number one, you have centrifuges
used to enrich uranium to a 20% level, well above anything used for civilian purposes. number two, they want sanctions lifted off at the beginning. they want to frontload the lifting of sanctions. it seems to me these are the two central issues. if we cannot negotiate those to our satisfaction, we ought to get up and walk away as the french are apparently willing to do. now the optics. if it appears the united states is the one responsible for walking away rather than the uranian's, it will be difficult to hold all the other countries imposing fashions on iran. options are important but the substance is crucial here. i think for the iranians to come at this point after a year and say, we want the sanctions upfront and we want the highest rate centrifuge as possible so we can enrich adam morris -- more efficient level, we have seen 17 years of iran having a covert program.
not to simply produce a civilian nuclear power capability, but to have the capability of taking out for a nuclear weapons capability. i think optics are important but the substance is crucial. we should not appear to be walking away by ourselves, but with our allies saying, these are the two issues we should agree on. erik: it sounds to me as though you think -- i do not detect a lot of trust in the iranians from you. sounds a you believe they are negotiating in bad faith. william: i do not think we should trust them. we have seen to have a covert program for 17 years before it was discovered tells me they were not interested in producing power for making pharmaceuticals or other conventional purposes. it seems to me the goal was they have a secret program, unlike let's say -- which has a nuclear program but was totally transparent and they want the rolled to know what they're doing with it as opposed to what
iran is doing. i think it is clear iran has had as its goal capabilities to break out and have a nuclear weapons program. now they have enriched to 20%. once we agree they couldn't rich, the question is how we negotiate them down to what level, what level of centrifuges are possible, etc. now these are the key issues after a year that they say we have not agreed upon. it will be difficult. they have to earn our trust and they have to start showing they are capable of making these agreements and sticking with them, and then the sanctions come off gradually. if we agree to frontload the lifting of sanctions, the game's pre-much over and you will see a proliferation in the region. stephanie: what do you think of brought her chaos in the middle east right now? yemen, syria iraq question mark situation is bad across the board. william: these sectarian and
ethnic hatreds have been simmering for a long time. when we remove saddam hussein, we took the pot off the boiling vat. that, coupled with the arab spring, coupled with our inconsistency on how we would deal with syria i think has contributed to the situation we now see. what is happening is we're seeing a sectarian strife layout and the clash within a civilization taking place. the good news if there is any in any of this is the gulf states are now taking responsibility come at least some, for themselves. you now have the saudi's using force, which they have not used before. you have the uae joining with them. egyptians, morocco jordan, so they are saying now they must confront this sectarian strife within them, rather than simply relying upon americana and the americans coming and trying to impose will upon ethnic hatreds
and differences that have existed for many years now. there is some good news in terms of gulf states now, trying to form a real gcc that has military power behind it and the determination to act in concert with each other rather than opposition. erik: isis or it iranians? william: a big country with a sophisticated military that has a history of sponsoring terrorist activities that as the potential to upset the balance in the region. that is what is going on now. a contest between a balance of power, whether it will be the saudi's and the sunni populations, or iran and the shia populations. that potential for conflict in the region is bigger, i think at the moment, then isis. ice is is very dangerous, but isis can be contained. the question will be, can iran be contained in that sense? can it be integrated into an
international regime of sharing power or using their power for non-revolutionary purposes in the region? if you look at the region now, iran supporting syria, supporting the hezbollah in lebanon -- in lebanon, now supporting these in yemen. they are spreading their power, not to mention what they have been building in gaza. erik: we have to run to it to i for having to cut you off. founder of the cowen group, william -- cohen group, william cohen. ♪
with the fastest in-home wifi and millions of hotspots xfinity is perfect for people who love fast. don't miss furious 7 in theaters april 3rd. >> live from bloomberg headquarters in new york this is "market makers" with erik schatzker and stephanie ruhle. stephanie: welcome back. markets across the pond are closing for the day. let's go to the breaking news desk for our market correspondent olivia sterns, who is taking a look at the action out there. olivia: averages are closing. stocks looking a little weaker in particular. a weakness in energy and commodities as energy continues to sell off. also, a big call predicting iron
or that fell below $50 yesterday will head further south today. you can see the stoxx 600 in europe up. a whopping 16% since the start of euro. 1/10 of 1%, and the dax, the benchmark in frankfurt by about one half of 1%. a couple big movers to tell you about. if it day first of all, and good news from mns. saying the general merchandise unit actually rose for the first time since 2011. the shares are up about 4.5%. in the past couple of years really struggling to grow general resale. they have not gone anybody to buy those jumpers. another thing we're watching the parent company of german wings, a little lower. they have to borrow from a recommendation on the airline. k pn, a dutch telecom company.
. the acquisition of a belgian mobile phone business. a little bit of a softer day in europe. stocks are higher. if you are trading tomorrow to in. tom and i are doing a special starting at 7:00 a.m. erik: airbnb is headed to cuba. taking the hospitality world ice storm. now that u.s. companies are allowed to do business there. the listings are already up. airbnb will face challenges. spotty internet access, for one. and the small matter that many cuban homes do not have water. cory johnson is with us from san francisco. i looked at a couple of these listings. no hot water and maybe that it's ok if you are only paying $22 per night. cory: it is cuba. it is hot already. i think this is great because it tells us what airbnb is and what
other hotel companies are not. it took meyer landscape two years to build a hotel in atlanta and by the time it was told, the revolution was well underway. airbnb can rolling as they have in every other market, unconstrained by the difficulty of developing real estate and the balance sheet is not constrained by having to capitalize such development. it really shows you the way airbnb has changed the hotel industry and it indeed is hurting the hotel industry. for every 1% of gains for airbnb in terms of market, of adding rooms, it hurts the rest of the industry. it is directly hurting the hotel industry. all you have to do is talk to the hotel owners to do -- to know that. erik: how realistic is business for airbnb in atlanta given the fact that internet access is spotty.
there is some access, but not a lot. cory: there is crummy internet access very weak. the proliferation of internet and wi-fi is very limited. the quality of signals is very bad throughout cuba. erik: it is the mere fact they are establishing a beachhead more significant? cory: i think so. this is the kind of thing that could grow very fast, a lot faster than dealing with bureaucracy in cuba trying to build or renovate hotels that exist. this shows the way there are a lot of companies out there distracted in technology because they go after the markets without the costs of developing products and inventory. it is the same thing over does in the taxi business. they do not have that limitation or lists. they do not need to own those
cars. airbnb is doing the zach same thing in the hotel business. we know from their growth worldwide that they have over 500% growth in terms of the number of rooms offered and no hotel company could ask that. the cofounder and ceo of airbnb a miss we tweeted last year that when marriott announced a conference call that they would add 30,000 rooms this year, he said, they would add been two weeks. that is what the business is all about. erik: we should not leave people with the impression there are not hotels in cuba. the issue is there may be many more american tours -- than the hotel rooms to accommodate them. cory: to be clear, tourism is not legal for america in cuba. businesses are becoming more
allowed with significant limitations. i think this shows how technology companies are fearless in what they will go after and what the markets will go after, and moving fast where it is a maybe chief among them. stephanie: 1980's brand. still around. all right, cory johnson. have you ever stayed in club med? cory: not yet but i have got vacation days coming up. stephanie: we can do a deep investigative report. cory: count me in. you are beating me by exactly one point in the bracket. stephanie: we would love to take 10 grand. would you like to take 10 grand? cory: i think my earpiece is going bad. stephanie: we would love 370 grand if you would. our own west coast editor at large. coming up, a nightmare season
stephanie: welcome back. interest in fantasy sports has exploded in recent years. more than 40 million people play here in united dates, spending an average of eight hours playing per week. one leading website wants you to make it a daily habit. i do not think your boss does. that is why the philadelphia 76ers have partnered with this site in december and they have created a new fantasy contest exclusively for sixers fans. with us -- with us is the ceo of the philadelphia 76ers and the new jersey devils. it's fantasy basketball making the nba more popular? it is pretty popular already.
>> when you have a company like the draft king's giving away $1 billion in prizes, they crowned their first millionaire last week for a daily game, it will certainly heighten your interest if you are a basketball fan. or you are a traitor and you are pretty smart come this is probably a place to spend your time. stephanie: why do the 76ers get involved? >> as you know, at least according to your program, i working for some of the titans in finance, with josh and dave. they want you to take some chances and look for companies like draft king spare they have got an incredible ceo in jason robbins, an incredible management team. they are doing things differently and we think this is a window into the future of sports betting coming down the pike. erik: we covered this yesterday. the owner of the brewers was on with us and we were talking
about how the titans of finance, like david blitzer, like joss -- josh harris, are reinventing the way in -- professional sports is managed. ultimately, how it is run as an investment. is that what this is a part of? >> that is a good way to put it. when you are challenged every day to be thinking of new ways to drive revenue and integration, and always have your eyes and ears open for opportunities that might come in and around the space, it is a perfect example. it is a soft -- a thought leader. . they sponsor the nhl, so you could get some of your leafs, and i could take my devils, and we could go head to head but it is an incredible opportunity. the way we look at business is very different working with josh and david for sure. stephanie: could people play fantasy in such a big way keep people out of going to events? you want them in the seats.
>> we definitely do it what we're finding is it is the second screen and third screen while you're at the game. our games are fun and exciting and i do not think there is anything quite like a live experience. it adds a little spice to the game. the set -- it should be the second rookie in a row this year, and the staff and how impasse fantasy scores. erik: does partnering with draft king's position you or your organization better for the potential opening of the nba to legalize gambling? >> we certainly hope so. it is a learning experience for both of us, but we think it is coming and soon. a very progressive commissioner with adam silver, who i was fortunate enough to work for, who publicly said and supported -- it is there in europe and coming here. we think if you could understand the platform and have the right
partner, an opportunity unfolds. erik: there is preparing for gambling, that is one thing. but do you want people to be able to gamble on the nba? >> are people gambling on the nba, but i think openness and regulation in gaming on the nba is a positive step forward for a lot of reasons. stephanie: many of your fans are kids. should knew just be the love of the game? >> certainly not talking it to kids. for the kids, we have the junior sixers, we have got our dance team and flight club people who fly through the air. there are different segments. we talk very differently to front seat holders then people
upstairs. you talk to kids differently than a 35-year-old traitor who wants to have fun in gauging in fantasy sports. big bella, i wanted to change the name to big staff. stephanie: i think your microphone just went out. we will have to end it there. sorry, we just lost his mic. are we done? erik: we are not done. i want to know what happened. your speech for the first time that is hard. i want to know what you do next the draft king's varnish up with the sixers is one step toward the reinvention of the core part of your franchise. what is coming next? >> encore is an exciting time for us. we have got the potential for
four first-round picks this year, including our own, which will be a high lottery. we are in the building stage right now and it is going as well as we could have hoped. you almost would not believe the crowd at one of our games. stephanie: for me, it is what the concession stand serves. guess what, it is time to end this segment here's got o'neill is the ceo of the philadelphia 76ers, the new jersey devils and this guy loves newark's -- loves newark. adios. see you. we will be back with more in just a few. erik: i think it is a great idea. ♪
is a very preliminary outline of a deal between western negotiators and iranian counterparts. the your times for its part says progress. peter cook is at the white house. peter, what are you hearing? peter: what we're hearing is we will get a statement from the iranian foreign minister and also the eu foreign policy chief at this event at 7:00 p.m. local time in switzerland. where -- what we get beyond that remains to be seen to we have heard about the talk all day that this might be an assessment of effectively where they are at the conclusion of these conversations they have had into overtime. perhaps not the specific detail of a framework agreement we had been expecting. in a state has been pushing for through the course of the conversations and what we can also expect is that we will hear from the u.s. side from john kerry at some point today
offering his own assessment of where things stand at this point. a president for his part is about to leave the white house and head down south to louisville, kentucky, for an event will he be -- he will be focused on the economy. we did get a sense yesterday that if there is conclusions in this conversation the president would be prepared to weigh in. expect to hear the -- the first event will be the iranians and the u.s. foreign policy chief speaking first at this event in switzerland. erik: william cowan -- william cohen a few minutes ago told me you have to be careful when examining the talks and distinguishing the substance and optics here it optics could ultimately play a role in substance. from the american point of view, what is best, for the europeans to appear to take a harder line
than with the iranians? peter: the most important thing is that there is a front with the union and other -- and other, if they have a united front, it sends a message not only to iran, but it sends a message to domestic audiences, particularly here in the united states members of congress who may be skeptical about the deal particularly skeptical democrats. if the french are on board, the chinese, the rest of eu, it would send a strong signal that these conversations have in substantive, even though the statement may not say everything people wanted to hear. but we're also being told is that what we may hear is not the full assessment of what is happening here, that they are working on a secret document. it would give them more of a chance to talk. at the end of the june, the final effective deadline is the
at how things stand midway through the final trading day of the week. stocks are in the green as a trend of economic data continues before friday. equity markets will be closed and markets will be open until noon. tom keene and i will be here to break it all down for you. trying to track it today -- two day losing streak. joining us today is the senior equity derivatives trainer. thank you so much for joining us. you could say the jobless claim is falling from a nine week low. what has been the reaction of the market? >> we are waiting for further clarity from the fed. still a lot of debate about when the fed will expect lift off. olivia: how will you cope with tomorrow?
>> is an interesting situation. , options trades and of the report with today really not much is going on. stephanie: you have got a trade on the banks. the etf, what is the play here? >> i like downside, it captures a majority of bank earnings, captured in mid april. there has been a lot of positive spin on fx trading. it is really a small part of bank revenue. in the grand context of things revenues have been declining. it is about 9% of that. a lot is being made over something that may not the that important in the grand scheme. olivia: what about dealmaking? we had morgan stanley saying this is the best environment jim has seen in 15 years.
>> it has happened late in the quarter and it is unclear how it affects the quarter as a whole. lower loan growth, net interest margins are shrinking and the idea that loan-loss reserves which banks have been using for many quarters are now shrinking and will not be available for banks to use. olivia: we are also watching micron shares in the green after the semiconductor maker coming in with sales. >> the sentiment was very gloomy going in and people knew it was not great. this is kind of a reflection of negative sentiment where things are not as bad as they thought. all the bad news, a big bust for options players.
the implied earnings move is 9% here at anyone who is buying options is probably sitting on losses. olivia: 22% year to date. even if they're up two thirds of 1% today, a lot of pain as a long-term shareholder. max, great to have you on this morning. thank you for joining sp or that does it for "on the markets." "money clip" with pimm fox is up next. you do not want to miss it. ♪
pimm: welcome to "money clip." i'm pimm fox and here is the rundown. walmart, target and mcdonald's in greece workers pay that isn't enough to promote wage growth? -- increase worker pay. nissan shows off some new models. the chief executive explains at the new york international auto show. game type or bloomberg's bracket for a cause.